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James Li
James Li
Articles (886)  | Author's Website |

Warren Buffett’s American Express Falls on Increased 2nd-Quarter Costs

Increased consumer spending costs offset strong growth in billings

July 19, 2019 | About:

American Express Co. (NYSE:AXP) said on Friday that although second-quarter earnings of $2.07 per share increased 13% year over year, consolidated expenses increased 9% from the prior-year quarter.

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Company reports strong growth in billings

American Express CEO Stephen Squeri and Chief Financial Officer Jeffery Campbell said during the earnings call that the the New York-based credit card company reported the eighth-straight quarter of forex-adjusted revenue growth of at least 8%. For the June quarter, forex-adjusted revenue growth of 10% was driven by strong growth in several businesses, including billings.

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Campbell said the company reported 7% revenue growth in billings, driven by 8% growth in proprietary billings. U.S. customer billings increased 8% on strong acquisition and consumer spending, while international, small and mid-size customer billings increased 17% on double-digit growth in Mexico, Australia, the U.K. and Japan.

High card member services costs offset strong revenue growth

Although the company reported strong revenue growth for the quarter, card member services costs increased 35% year over year as it continues to develop its “differentiated value proposition model.” Campbell listed several components of the proposition model, including travel benefits like airport lounge access and strong acquisition and engagement in fee-based products.

Stock falls on the heels of increased costs

Shares of American Express traded at an intraday low of $124.02 Friday morning, down 3.41% from Thursday’s close of $128.40.

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Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) has not released its second-quarter portfolio yet as the deadline is 45 days after quarter-end. As of the March quarter, the conglomerate owned 151,610,700 shares with an equity portfolio weight of 8.31%. The position represents the conglomerate’s fifth-largest holding.

Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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